Jennifer Johnson knew she had a problem when she discovered that
some of her 15 employees were taking their complaints to someone
other than her. "People were going to [a senior consultant at
the company] for the real scoop, as opposed to coming to me,"
Johnson says. "I found it kind of troubling."

The 37-year-old founder of Johnson & Co., a 2-year-old Santa
Cruz, California, marketing consulting and media relations firm,
was right about one thing: It's important for entrepreneurs to
understand who is talking to whom, who is listening, and how most
of the information and influence really flows in your company. No
matter what your organizational chart looks like, experts in an
emerging discipline called social network analysis say all
companies have hidden, shadow organizations where the real work
gets done.

Shadow organizations have aroused the interest of such companies
as Lucent Technologies, IBM, Rubbermaid Inc. and Boeing Co. These
firms have discovered that social network analysis is more than
just an exercise in clique-finding. In 1998, consultants at Ernst
& Young LLP reported finding opportunities to save a large auto
industry supplier more than $14 million just by using social
network analysis to uncover inefficient communication that was
hamstringing innovation.

Understanding and effectively managing the informal
relationships and unofficial communication channels in shadow
organizations can greatly reduce employee turnover, improve
diversity and help make the most of your company's invaluable
knowledge resources, says Valdis Krebs, a Westlake, Ohio,
consultant who specializes in social network analysis. "If you
go back to the old question of whether it's who you know or
what you know that gets you ahead," says Krebs, "the
answer is, it's who you know."

Mark Henricks is an Austin, Texas, writer who specializes in
business topics and has written for Entrepreneur for 10
years.

Age-Old Theory

Social network analysis can trace its origins to the 1930s, when
sociologists began using tools called sociograms to map patterns of
personal connection among members of a group. Sociometry, as the
emerging discipline came to be known, was further refined after
World War II, but until recently, social network mapping remained
of interest mainly to academics. The key to making network mapping
useful to businesses was the availability of personal computers
that could analyze and graphically display even very complex social
networks quickly and inexpensively.

Organizational network mapping, as the practice is also known,
still isn't quite ready for prime time, however. "There
are a few of us who know the tools and can do it," says Eric
Darr, a social network analysis consultant who works out of Ernst
& Young's Philadelphia office. "But to make it
mainstream, it needs to be made easier."

Social network mapping's benefits to businesses are already
proven. Tracking informal relationships within your company can
explain how and why new hires either succeed or fail to assimilate
into your corporate culture. It can also explain why failure dogs
efforts to boost work-force diversity, says Krebs. "You can
get two people with identical abilities and resumes, but one is a
white male and the other is a black female," he says. "A
year later, one will have connected to the right information flows
and will perform better, not because of ability but because of
better connections."

Similar factors control how well a company retains valuable
employees, especially new hires. Workers are more loyal and perform
better when integrated into a shadow organization. "Employees
who are well-connected into a social network," says Darr,
"are less likely to leave." Companies undergoing mergers
have found that social network mapping illuminates unsuspected
leaders and other employees who control influence and information
flows--both of which may be critical to conducting an optimal
reorganization.

Connect The People

Network mappers start by surveying a company's employees to
get answers to a handful of crucial questions. The basic one: Who
do you go to for information about what's going on? Questions
may also address the frequency of interaction or differentiate
between requests for information and requests for influence. Using
answers, mappers draw diagrams that graphically show who is
connected to whom.

The maps, while superficially little more than collections of
dots connected by lines, reveal important information about the
employees who are your real nodes of influence and information. By
looking at the number and location of the connections between
people, you can also highlight individuals or groups who have
become partially isolated from the rest of the network. These
fragments hamper efficiency by creating bottlenecks if they're
getting information but not passing it on, Krebs says.

Once you've identified problem areas, you can deal with them
by changing communications systems, such as upgrading e-mail
systems or altering the chain of command. You can also change the
processes you use to communicate, for instance, setting aside time
for company retreats. Often, you can even modify the official
organization. After her epiphany about the shadow organization at
her firm, Johnson created a new title: account planner. She fills
the position with people she's identified as shadow mentors to
help new employees find their way. Network tinkerers also get
results by relocating employees to bring them into the loop.

Missing Links

Although the process can be effective, mappers have to be
careful. If you don't get a 100 percent response to your
surveys, you risk creating an incomplete network map that lacks
important links, warns Darr. Even if everyone completes the survey,
answers may intentionally be inaccurate. Some employees may inflate
their actual importance in the network. Others may fear the answers
will be used against them. This is especially likely if layoffs are
anticipated because the surveys may be seen as tools for deciding
who is expendable.

Shadow organizations are less important in highly structured
environments, such as assembly lines, than in so-called knowledge
organizations, such as customer service related work or
new-product-development operations. However, they're just as
important in small organizations as in large ones. And, because
groups larger than a few hundred can't be mapped very well,
small businesses have the advantage of being able to map their
entire company, Krebs notes.

One problem with mapping entrepreneurial companies is
they're often dominated by the founders. These individuals, who
may require all important information and decisions to go through
them, can become bottlenecks rather than networking facilitators,
say network mappers. The personal style of an overcontrolling
founder may be the first casualty of a network mapping project.

And that's not the only cost. Consultants such as Krebs may
charge $5,000 or more to map a small company, including
administering surveys, analyzing results and following up. But as
tools become polished and more companies try social network
analysis, costs should drop. The Internet's rise has increased
appreciation of the value of networks, and, as more workers become
knowledge workers, managing their knowledge through social networks
also gets a higher profile.

As important as internal networks are, it may be more valuable
to apply similar tactics to understanding external networks such as
your customers, suppliers and partners. Spotting a gap between two
unconnected groups--known as a structural hole--can help
entre-preneurs make companies run better. "Spanning structural
holes," observes Krebs, "is how an entrepreneur creates
opportunity."

Next Step

Social network mapping consultant Valdis Krebs maintains a Web
site with a variety of information and links on the topic at
http://www.orgnet.com

Management and human resources writer Phyllis Gail Doloff
discusses shadow organizations in a February 1999 article,
"Beyond the Org Chart," in Across the Board
magazine. For reprints, call (212) 221-9595.